Highland Group: Extended-stay market ‘far larger’ than expected

by Chuck Dobrosielski

Extended-stay demand in traditional hotels is 40 percent greater than in bona fide extended-stay hotels, according to The Highland Group and Kalibri Labs.

For the 12-month period ending in June, the two groups found traditional hotels in the United States accommodated 71 million room nights from guests staying seven nights or longer, while extended-stay hotels only recorded 50 million corresponding room nights.

The disparity in guest paid room revenue was even starker. Extended-stay guests staying at traditional hotels spent $8.2 billion, while those at extended-stay hotels spent $4.6 billion.

Nationally, the share of extended-stay demand in extended-stay hotels is 48 percent. In traditional hotels, extended-stay demand is 12 percent; however, there are 10 times as many rooms compared to extended-stay hotels.

“For the first time we have reliable empirical data on the size of the extended-stay market in hotels and it is far larger than we expected,” stated Mark Skinner, partner at The Highland Group.

Extended-Stay Occupancy and Supply

According to an earlier report released by The Highland Group, extended-stay occupancy in Q2 stood at its highest level ever recorded for that quarter—79.9 percent. Comparatively, STR reported U.S. hotel occupancy to be 70 percent overall during that same period.

For first half overall, however, extended-stay occupancy dipped 0.1 percent compared to the same period in 2018. The Highland Group attributed this to economy- and upscale-segment demand growth lagging changes in supply.

By mid-year, extended-stay supply stood at 485,608 rooms, a 5.6 percent year-over-year increase, according to The Highland Group. The 25,731 net change in new rooms stands in contrast to the more than 29,000-room increases recorded in both the preceding 12-month periods.

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Report: Extended-Stay Demand in Traditional Hotels is 40% More Than in Extended-Stay Hotels

NATIONAL REPORT—According to a new report released from The Highland Group and Kalibri Labs, for the 12-month period ending June 2019, non extended-stay (traditional) hotels in the U.S. accommodated 71 million room nights from guests staying seven nights or longer. Corresponding room nights in extended-stay hotels were 50 million.

The disparity in guest paid room revenue was even greater with extended-stay guests spending $8.2 billion at traditional hotels compared to $4.6 billion at extended-stay hotels.

Nationally, the share of extended-stay demand (ESOC) in extended-stay hotels is 48%. In traditional hotels, ESOC is 12%, but there are 10 times as many rooms compared to extended-stay hotels.

“For the first time, we have reliable empirical data on the size of the extended-stay market in hotels,  and it is far larger than we expected,” said Mark Skinner, partner at The Highland Group.

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Marriott, Expedia sign wholesale rate deal

By Jeff Weinstein on 9/18/2019

Marriott International on Tuesday expanded its partnership with Expedia Group Inc. by naming it exclusive distributor effective October 15 of its wholesale rates, availability and content to a huge network of global travel providers. As a result, many redistributors will no longer have direct access to Marriott’s rates and inventory and will have to go through Expedia Partner Solutions.

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“The hotel industry has had a major problem in controlling wholesale inventory. By definition, wholesale rates are intended to be sold as wholesale products which usually means bundled into flights or car or some other element with the hotel rate meant to be rolled into the full package rate,” Cindy Estis Green, co-founder and CEO of revenue strategy consultancy Kalibri Labs, Rockville, Maryland, told HOTELS on Tuesday. “However, some recipients of these rates have gotten the inventory and sold them in a retail setting where they were sold as room only without any bundle. This is not the way this inventory was meant to be distributed and the rates are not offered or designed to be sold alongside room-only rate products.”

Green added that she assumes Marriott was looking for a controlled environment to be sure these rates are offered in the market in the way they were intended. “I am sure others would seek a similar kind of controlled environment to be sure their wholesale rates are not misrepresented by others and sold in ways that were not sanctioned by the owner of the inventory.”

The ability to prevent unauthorized usage of wholesale rates is good for Marriott and all of its constituents, according to Green. “They can have clearer and more logical pricing without random rates popping up that won’t make sense to the consumer. If others do the same and the practice of inappropriate use of wholesale rates is reduced or eliminated, this is good for Marriott to take a leadership position in putting those on notice who abuse their privilege in using hotel inventory in ways that are not sanctioned.”

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Hoteliers Take a Harder Look at How They Set Room Rates

Amateurs cut rates to fill hotel rooms. Pros take more sophisticated approaches, such as coordinating to stimulate demand from the most profitable customers. — Sean O'Neill

Some hotel operators — MGM Resorts, RLH, Omni, Radisson, and Melia — have been fine-tuning their efforts at setting rates for rooms, upgrades, and other services. They’ve been leveraging a growing prowess at automation and cross-department teamwork to set prices for maximum profit.

A case in point: MGM Resorts International has aimed to add tens of millions to its bottom line this year from enhanced revenue management.

MGM Resorts intends to focus more on reserving space for its most profitable customers —namely, gamblers, convention-goers, and leisure travelers who book directly. It can do that by targeting promotions to people who are more willing to spend on food, drink, and upgrades.

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A REVENUE STRATEGY APPROACH

Hotels are finding it’s not enough to get revenue managers and sales and marketing teams to talk and coordinate with each other more often. They need broader insights into the true cost of each method it uses to get a guest.

“Rate optimization alone will not be enough,” said Cindy Estis Green, CEO and co-founder of Kalibri Labs, another hotel vendor. “The legacy tools that have been in use for 20 or 30 years are not going to be adequate to meet the demands of today’s digitally dominated market.”

Green said her company focuses on the profit contribution of each method a hotel uses to draw guests. Earlier this year, Kalibri Labs launched a product called Hummingbird.

“We generate competitive sets for each rate category or each market segment, such as corporate, online travel agency, government, and group,” Green said.

“We look at the half-dozen or so hotels that have transactions that match most closely with your hotel,” Green said. “Then we generate ten market segments for weekends and ten market segments for weekdays.”

The company says hoteliers, owners, developers, brokers, appraisers, and major brands use its data and related tools, which go beyond Hummingbird. But it declined to give details.

“Rather than thinking about which hotels you compete with, we help you think about who has the business you want to go after and that could be gotten without inflating your bottom-line costs,” Green said.

The Hummingbird tool is unlike any traditional revenue management system. Whether the product will be a market success remains to be seen. But its approach represents a change in how hoteliers are thinking about broader issues.

“We point hotels to demand that is coming into the market and that looks like business that would be a match for your hotel,” Green said. “We show you which competitors are getting that business, how much it’s worth, what channel it’s coming through and when, and whether you need to dial up your sales effort or dial up your paid search or dial down your pricing to get it.”

In 2017, investors valued Kalibri Labs at $33 million during an investment round that included Shiji Group.

It’s difficult to judge how well Kalibri Labs’ tools work. Hotel chains like InterContinental Hotels Group that have worked with the company have been quiet about their views of its new Hummingbird product.

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Bridging the Divide Between Revenue, Asset Managers

As the numbers people, revenue managers often have the information owners and asset managers need, and experts say communications between the two sides are vital.

By Sean McCracken, News Editor

From left: Kim Gauthier, of HotelAVE; Diane Fox, of CHMWarnick; and Cindy Estis Green, of Kalibri Labs; talk during the 2019 HSMAI Revenue Optimization Conference. (Photo: Joe Szurszewski)

From left: Kim Gauthier, of HotelAVE; Diane Fox, of CHMWarnick; and Cindy Estis Green, of Kalibri Labs; talk during the 2019 HSMAI Revenue Optimization Conference. (Photo: Joe Szurszewski)

MINNEAPOLIS—It’s vital for ownership groups—including the asset managers that represent them—and revenue-management teams to work together toward common goals, according to experts who spoke at the 2019 HSMAI Revenue Optimization Conference.

During the “Revenue professional’s guide to asset value and profitability” panel, Kim Gauthier, SVP of HotelAVE, said revenue managers need to understand what owners want and what success means to them. That includes focusing on the right metrics.

Net operating income is “what asset managers are focused on,” she said. “NOI is what pays debt service. And you need to remember that’s somebody’s pension fund or inheritance. It’s (important to someone), so the decisions you make on a daily basis have a lot more impact on the people above you. It can be mind-boggling when you think about what that looks like to them.”

Diane Fox, SVP at CHMWarnick, said it’s similarly important for asset managers like her to have some empathy for revenue managers.

“What you guys do is very complicated,” she said.

The role of revenue management should grow significantly on-property to the point that there should be a position equal to general managers that reports directly to ownership and oversees the revenue management and strategy, Fox said. That person should also have a laser focus on profitability.

She said communication remains a significant hurdle.

“Today, what we can accomplish is to help break down the silos to improve communications and strategy among digital teams, sales teams and above-property teams,” Fox said. “It’s all very complicated.”

She said revenue managers will benefit from understanding the strategy behind owners’ investments into hotel properties and what they hope to get out of them.

“You should ask yourself, ‘What did the investor want to accomplish?’ … Then ask yourself ‘If (I were the owner) what would I do?’” she said.

Gauthier said in addition to understanding ownership’s initial objectives, revenue managers need to stay in touch with how those objectives evolve over time.

“It could be that right now we need the revenue team to focus on profitability because of a debt-service test and we’re less concerned about (revenue per available room) index,” she said.

She said bridging the gap is especially important when it comes to larger organizations.

Gauthier noted revenue managers are often younger and have a fresh perspective.

“You should think about how you’d think as a customer and bring that to the table, especially with the people who are older than you,” she said. “I think there’s a lot to add there.”

Asked whether revenue managers should ultimately be the person on-property tasked with protecting the value of hotel assets, Gauthier said the approach needs to be more collaborative. She said that often puts revenue managers in a position where they need to have uncomfortable conversations with owners and asset managers, but they will benefit from transparency.

“Without honest communication, you don’t have any self-integrity,” she said. “It’s not fun, and nobody wants to be in that place (where they have to talk about bad news), but you have to step up and voice it. Hopefully you’re in an environment where people are in a position to listen.”

She said being able to handle these difficult conversations is no longer an option.

“You have to man up and say what you want to say, otherwise you can go be a farmer,” Gauthier said. “It’s the way the world is now, and it’s going to continue to be that way. You have to say your piece and be comfortable you did everything you could do.”

She said that stems from the fact that when something is going wrong at a hotel in terms of operations, revenue managers have the best view into why that might be or at least to raise a red flag.

Fox said revenue managers need to have a significant voice in making major decisions such as the property’s way to allocate resources and the right channel mix.

“You’re in a unique position to bring ideas to the table,” she said.

She said revenue managers are often put in roles that are intended to be focused on the day-to-day, but setting big-picture goals will help them better align with ownership’s interests, as long as they understand what those interests are.

“You should always understand what the end goal is of the ownership group or for their investment in the asset,” she said. “Then you try to change the way you’re thinking and go back to ‘What would I do (if I was that owner)?’”

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Revenue Management Roles Elevate Women in Hospitality

by Jason Q. Freed, Managing Editor

It was no accident that the stage comprised three female hoteliers during the “Revenue Professional’s Guide to Asset Value and Profitability” session at HSMAI’s Revenue Optimization Conference on Wednesday.

Image from iOS (6).jpg

Led by Kalibri Labs’ Co-Founder and CEO Cindy Estis Green, the three women suggested the importance of a revenue leader in today’s hotel has paved the way for women to move up the hospitality career ladder.

“Women often don’t have access to direct P&L experience,” said Diane Fox, Senior VP at CHMWarnick, which manages more than $15 billion in hotel real estate. “The stuff Cindy is doing is making it happen.”

Women make up a large percentage of revenue managers throughout the industry and the panelists suggested that, because revenue managers have ascended into leadership and even executive roles at many hotel companies, this profession has helped women break the glass ceiling. Now more than ever, women are making critical decisions that affect the bottom-line profitability of individual hotels and entire hospitality companies.

And they’re making critical changes to how revenue teams operate as well. Estis Green is leading this charge, highlighting the importance of a shift from traditional revenue management to a more holistic approach termed revenue strategy.

“The revenue role needs to be expanded,” Estis Green said. “Sales and digital and branding need to all be aligned and focused on the best opportunities, not every opportunity.

“Be smart and surgical in the way you target your business,” she said.

“Revenue management is the key to the business,” added Kim Gauthier, Senior VP at HotelAVE, which provides asset management services to 48 hotels in North America, Canada and Latin America. “RMs should have a lot more control than they’re given. This is an opportunity for them to bring a lot more ideas to the table and then present the problem with new ways to get it solved.”

She said revenue teams should ask themselves what they can do to “break down the silos” between complicated hotel operating departments. Key questions they should ask are: What is the investor trying to accomplish? How long will it take to stabilize the asset? If it were me and I were responsible, what would I do?

“And then bring those ideas to the table,” she said.

Gauthier outlined the importance of a revenue team by compelling the audience to think about who their decisions affect.

Net Operating Income “is what pays the debt service,” she said. “The decisions that you’re making affects a lot more people above you. This is someone’s pension plan, it’s someone’s inheritance.”

What’s Changing in RM?

Estis Green said revenue management is no longer just about pulling pricing levers; the role has expanded to ensure the hotel is building the right mix of business.

Gauthier agreed, suggesting hotel revenue managers spend less time pulling reports and more time strategizing.

“The purpose of the revenue meeting is to sit around in a group and strategize,” she said. “Present the problem and, as a team, identify a solution.”

Estis Green showed Kalibri data from their 52,000 participating hotels that suggested 75% of the average hotel’s RevPAR comes from four rate categories: Rack/BAR, group, corporate and OTA. Of the four categories, OTAs rank third in amount of contributed demand but fourth in contribution to Net RevPAR.

Almost all business comes through digital channels, she said, which can be quite costly.

“The digital marketplace is powerful and super expensive,” Estis Green said. “Traditional revenue management is an important component but determining overall business mix has to be more than filtering rates and inventory.”

She implored revenue managers to take that same concept of filtering and apply to the top of the funnel, suggesting they be more proactive in determining the right business for sales teams to target.

“Instead of going after every group, every digital opportunity, be selective,” she said. “Ask how we can align our spending with what’s in the market and take net revenue into account.”

Estis Green said RevPAR Index is a simple way to communicate where the hotel stands to key stakeholders, but she questioned whether it was the right metric for revenue managers to measure their success.

“It’s all about channel mix and optimization,” she said. “Sometimes I don’t want to be indexed 100 in the group segment, I want to be 175, and maybe in some other channels I’m fine being 50 or 75.”

Fox said that through 20 years of watching the hospitality industry transform, she now sees the need for a revenue leader in the C-suite.

“What you guys do is very complicated,” she told the audience. “But you’re still very siloed on the management and brand sides. You almost need a Chief Revenue Officer, someone who’s as senior as the GM and understands all the levers and is responsible for the P&L.

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What the Hotel World Looks Like in 2020

By Bob Rauch, President of RAR Hospitality and Sarah Andersen , Business Development Manager at RAR Hospitality

Hotel Distribution is arguably the big topic of the near term. Expedia Group and Booking Holdings (previously Priceline) are the two big online travel agencies (OTAs), dominating well over 70% of OTA market share. Now this duopoly faces major disruption by Airbnb, Facebook, and Google. Airbnb just bought HotelTonight, an app-based company that sells last-minute, unused boutique and independent hotel inventory. Meanwhile, SiteMinder's "BookingButton" already integrate into Facebook business pages as a widget, eliminating the need to click away from the site to make a booking. Add in the possibility that Google might be more proactive in playing in the travel space and an OTA war is in the making. What does this mean for the hotel industry? It's great news. The average commissions for Expedia and Booking Holdings are 15% or more. Airbnb has traditionally worked on a model of 3%. Many other peer-to-peer vacation or short-term rental companies are also out there booking non-branded hotel rooms. As OTAs consolidate and compete, we believe the commissions will come down.

OTAs have always promoted the "billboard effect," espousing that they are promoting hotels with hundreds of millions of dollars and that spending benefits the industry as a whole. That theory has largely been debunked by Kalibri Labs in a study funded by the American Hotel & Lodging Association (AH&LA). Recently, direct booking channels, promoted aggressively by the brands, have changed the landscape with direct outperforming OTA bookings over the past year. Moreover, there are other entities that could enter the fray such as Amazon, Apple and as mentioned above, Google and Airbnb.

Artificial Intelligence

Robotics is making great strides in hospitality. Service robots will soon be mass produced and can vacuum floors, deliver items to guests and answer questions like a concierge. Machine-learning combined with message apps are bringing a new model of engagement to the mobile screenand chatbots can enhance the conversation with customers, enabling better experiences. They are able to answer questions, enable a purchase or report weather just like Amazon's Alexa can in your home.

The "Internet of Things" will bring big data to the forefront of consumer decision-making via wi-fi and new 5G standards. According to a MarketsandMarkets report, the global WiFi market will be worth 33.6 billion by 2020. In this mobile-connectivity revolution, hotel agents will become computer-aided and support cognitive networksand consumer's semantic search will be based on their interests and priorities. Choosing a destination and creating the perfect experience will become much simpler. Further, platforms like property management systems (PMS), central reservation systems (CRS) and revenue management systems (RMS) will make the merchandising and conversion process more automated while pricing becomes more dynamic and predictable.

Personalization

User-generated content combined with personalized itineraries will continue to enable tech-savvy and sophisticated travelers to increase their travel expectations. Taking a page out of Airbnb's book, hotels willdeliver experiences in a highly personalized and flexible manner. This is done by continuing to improve the percentage of business from direct bookings. The big hotel companies own the customer and while the costs are high for independent hotels to obtain direct bookings, Hilton, Marriott and IHG already have tens of millions of loyal travelers.

Kalibri Labs

Smith Travel Research (now STR) started the shift from hotelier to educated hotelier 30 years ago. The next generation competitive set is now determined by each segment (match by geography, rate, day of week, lead time; overall "demand curve") comes from Kalibri Labs (KL). Cindy Estis-Green and Mark Lomanno (former STR President) have created an outstanding platform for channel analysis, acquisition costs review, loyalty contribution and more. They have standardized mapping and cost factors by channel, market segment, rate category, channel costs, transaction fees, loyalty costs, retail commissions, wholesale commissions, and sales and marketing costs. According to KL, customer acquisition costs are 15-25% of guest-paid revenue (transaction-specific costs and cross-channel costs). Information on this is available from KL.

Final Thoughts

Change has never been easy for some, but we have reached the tipping point in hospitality where the old school methods (hard work, talking to customers, caring about each employee) are not enough. They are critical, because without the "hands on" touches, we do not have hospitality. However, without deep knowledge of technology and industry trends, we become dinosaurs, especially if English is our only language. The next generation traveler wants to hang-out together in the lobby as a party of one, wants and expects technology and is more frequently an international traveler with an occasional need for additional languages. Those who are not up-to-speed will increasingly feel the heat—those who are up-to-speed will enjoy the rapid changes coming our way. To a great remainder of 2019!

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Room-Block Perks for Conference Guests Need More Promotion

Editor’s Note: It turns out loyalty status and the power of the corporate card are a couple of reasons conference attendees don’t book inside a hotel block. Event organizers should do a better job informing attendees of the perks that come from booking with the group — Andrew Sheivachman

Encouraging conference attendees to book inside the group’s room block helps meet financial demands on both sides of the equation. Half of U.S. conference goers, however, will book however they like.

New research from Kalibri Labs, Prism Advisory Group, PCMA Foundation, Hilton, and NYC & Company shows that just under half of conference guests regularly book a room from an event’s hotel block. Those who don’t have a variety of reasons for booking elsewhere.

With group business for U.S. hotels slated to decline slightly over the next two years, event organizers would do well to bolster marketing promotion of block perks and reduced rates for conference attendees.

THE UNINFORMED BUYER

U.S. Convention Attendees Paid Lodging

Source: Room Block of the Future Report

The Room Block of The Future report found that those who don’t book inside a room block are generally less informed about the savings and perks of doing so, while also skewing younger. The report polled 750 U.S. business travelers on their behavior when traveling to a business convention, finding that 45 percent use a conference’s website to help plan their trip, while 24 percent use Google searches and 27 percent get recommendations on where to stay from colleagues and friends.

Overall, about half of conference attendees booked in the appropriate room block through an event organizer’s preferred booking tool, while 25 percent booked in the block but direct with the hotel or through an intermediary. The remaining 25 percent stayed at a hotel outside the block or used services like Airbnb for their lodging.

“As we released some early findings [to meeting planners], I don’t think they were that surprised by that 50 percent booking outside the block,” said Meredith Rollins, executive director of the PCMA Foundation. “What was interesting to them was the reasons why, like the importance of loyalty programs and other reasons like the perception that by booking in the block you are paying more.”
Diving deeper into traveler behavior, those who didn’t book inside the room block tended to use booking channels like typical consumers.

Two-thirds of those who booked outside the block, though, ended up paying more for their lodging than they would have if they booked through the event-approved booking service. These travelers believed booking in the room block would be more expensive, however, and that they wouldn’t be able to earn loyalty points if they booked in the block.

ON THE CORPORATE DIME

“Since a lot of these people are traveling and somebody else is paying, they felt that price perhaps wasn’t as big a driver as some of the other things,” said Mark Lomanno, senior advisor at Kalibri Labs. “Two-thirds who booked outside the block actually paid more.”

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Is Airbnb Hotelier’s Friend or Foe?

HOSPITALITY NET WORLD PANEL

HOSPITALITY NET WORLD PANEL

After the recent acquisition of HotelTonight, If there were any doubt as to Airbnb's true intentions of entering the OTA space and start aggressively competing with online travel agency giants such as Booking Holdings and Expedia, they need to be laid to rest immediately. see more

This viewpoint was created by
Max Starkov, Adjunct Professor NYU Tisch Center for Hospitality, Founder & Director at HEBS Digital

Airbnb over time has lost its host centric edge as it moves into a profit centric mode. Trying to argue that Airbnb is nothing else than another OTA in the landscape should by now be a mute point - acquisition of Hoteltonight, hiking up commission rates “to either pass on to guests or suck it up like you would with OTA’s”, possible investment in OYO, etc.
— Fabian Bartnick, Vice President, Asia Pacific & International Business at LodgIQ
Airbnb broke the ‘boundary’ between the accommodation and the hotel industries by focusing travellers on what they need is a place to sleep, not a hotel room. Airbnb, as a relatively new supplier of beds, works harder to better understand travellers and, as a consequence, travellers are willing to tolerate the inconvenience of waiting to be approved, and dragging their luggage to find their Airbnb. How many hotel brands have this power?
— Meng-Mei (Maggie) Chen, Assistant Professor at Ecole hôtelière de Lausanne
From the time they announced they were pursuing boutique hotel inventory in March 2018, Airbnb’s intentions became obvious. Just as Expedia and Booking.com have to diversify into short term rental, Airbnb has to add hotels. Growth rates are critical if they want to IPO and their penetration in vacation rental cannot maintain the meteoric rise with head-on competition from the OTAs. Pushback from tax and safety regulations in major markets has been another persistent headwind.
— Cindy Estis Green, Co-founder and CEO, Kalibri Labs

Airbnb to Invest in OYO Hotels and Homes

INTERNATIONAL REPORT—Airbnb will invest in Indian hotel start-up OYO Hotels and Homes, the home-sharing company confirmed to Hotel Business.

“Emerging markets like India and China are some of Airbnb’s fastest-growing, with our growth increasingly powered by tourism to and from these markets,” said Greg Greeley, president of homes with Airbnb, in a statement to Hotel Business. “In many of these markets, OYO is empowering local hospitality entrepreneurs to provide more options to more travelers. We share a dedication to offering people more choices when traveling, and we’re excited to partner with OYO as we work to make Airbnb for everyone.”

Maninder Gulati, global chief strategy officer at Oyo Hotels & Homes, added, “Airbnb’s strong global footprints and access to local communities will open up new opportunities for OYO Hotels & Homes to strengthen and grow, while staying true to our core value proposition. We’re excited by the possibilities and committed to bringing benefits to the millions of travelers who can now rely on Airbnb and OYO Hotels & Homes to find a home away from home.”

According to various media reports citing sources familiar with the deal, Airbnb will invest between $150 million and $200 million in OYO, which was launched in 2013 by Ritesh Agarwal. The company claims to be India’s largest hospitality company, with a network that currently spans more than 230 Indian cities including all major metros, regional commercial hubs, leisure destinations and key pilgrimage towns. It also has an international presence with hotels in Malaysia and Nepal. OYO is backed by global investors, including the SoftBank Group, Lightspeed India, Sequoia Capita, Greenoaks Capital, Hero Enterprise and China Lodging Group.

The investment comes on the heels of Airbnb’s announced purchase of HotelTonight, which the industry viewed as unsurprising move for the company, as it moves to increase its presence into the traditional hotel space.

Cindy Estis Green, CEO/co-founder of Kalibri Labs, was not surprised by this move by Airbnb.

Given their clear intention to move into the hotel space and the fact that their average rates are more aligned with the economy and midscale hotel sectors, this seemed like a logical step.
I expect we will see more of Airbnb’s active approach to the hotel community to build out their inventory as they compete more directly with Booking.com and Expedia.
— Cindy Estis Green, CEO & Co-Founder, Kalibri Labs

Owners must be informed on customer acquisition costs


By  Kurt Furlong

Revenue managers should take a closer look at metrics such as Net RevPAR to get a better handle on bottom-line performance.

As we come off the heels of the 2019 ALIS conference, the annual event which invariably sets the tone of hotel investment and operations for the year ahead, hotel owners are likely sharpening pencils even more than usual, looking at all possibilities for strengthening revenue generation and reducing costs. As an owner myself, and someone who has been charged over the years with honing revenue management skills on behalf of other operators too, my tendency is to continually analyze and assess the most profitable revenue—to identify the instances when optimized dollars flow through to the bottom line.

Customer acquisition costs for lodging continue to rise. And as revenue strategists, we need to take into account the various channels and sources of room revenue: all areas where commissions apply; the investment in brand or other loyalty programs; costs of the growing number of distribution channels; and all sales and marketing expenses, including the ever-changing and often enigmatic digital marketing platforms. Whether the booking costs are transaction-specific as in commissionable OTAs or GDS, or there are cross-channel costs via social media, franchise fees and even labor for sales and marketing, the total costs for acquiring our guests are increasing over time.

Revenue booked directly through brand channels such as brand.com, the brand app or brand reservations call centers provides a hotel with a 10% to 25% rate premium as compared to revenues booked through OTAs or the GDS. The ADR premium helps to build our bottom line.

As mentioned in Kalibri Labs’ 2018 “Book Direct Campaigns 2.0: The Costs and Benefits of Loyalty” report, the ADR for member rate/loyalty bookings “reflects a solid premium compared to OTA bookings” (after acquisition costs are removed), and grew to 9% in 2018, up from 8.6% in 2016. According to the same study, loyalty member campaigns in the last few years have strengthened or stabilized the increase of reservations via brand.com. While it clarifies that “both online channels are growing, brand.com generates 50% more bookings on average to U.S. hotels than the OTA channels.”

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Who’s Really Winning the Direct Booking Wars Between Hotels and Online Travel Agencies?

Editor’s Note: Skift Senior Hospitality Editor Deanna Ting presented a version of this story at the Bernstein Hotels Versus OTAs conference in New York on Thursday, February 28 to an audience of investors in the travel and hospitality industries.

So, who is winning the so-called direct booking wars? Is it the hotels? Is it the online travel agencies? Is it Google? Is it the consumer?

This is a question that so many people in the travel industry have attempted to answer and, thus far, we’ve seen some statistics that seem to suggest that the tide is changing a bit.

Back in November 2017, a little more than a year after many of the major U.S. hotel companies launched their respective direct booking pushes, a report from Kalibri Labs suggested that the hotels were, indeed, winning.

Compiling data from its database of more than 25,000 hotels in the U.S., including validated costs and daily transactions directly sourced from the hotels’ systems, Kalibri Labs found that there was indeed a shift in consumer behavior toward brand.com sites versus online travel agencies such as Booking.com or Expedia. More consumers than ever before chose to book direct versus booking on a third-party site.

Not only did the direct booking campaigns encourage consumers to book direct, but the Kalibri study also found that these campaigns were more beneficial for hotel owners than previously assumed. The hotels’ direct-booking campaigns — even by offering discounted rates to consumers — were actually generating more revenue for hotel owners than the online travel agencies were.

Kalibri Labs found that the net average daily rate of brand.com discounted loyalty rates was higher than the net average daily rate of room rates on the online travel agencies. The median net revenue benefit ranged from $9,000 to $33,000 per hotel as well, taking into account all discounts and loyalty and commission costs.

More recently, a newer report from Kalibri also showed that those direct booking campaigns engendered loyalty, or repeat business from consumers.

“Some people were sure [consumers] just signed up [for the hotel loyalty programs] to get discounts and that those members may have dropped off,” Kalibri Labs CEO and co-founder Cindy Estis-Green told Skift last month. “We didn’t track data by numbers of personally identifying information because of security, but the loyalty numbers keep going up. Fifty percent and growing is now the average when it comes to contribution to occupancy from brand.com channels.”

There are a few things to note here, however: The same time period covered by this second study was also when hotels enacted stricter cancellation policies, which may have had some impact on guest bookings.

So while Kalbri’s data and other data sources generally point to a slight shift toward more direct hotel bookings, that’s not the whole story in its entirety.

Read the full article on Skift

HSMAI Washington DC Chapter Announces Board Chair and Appointments

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HSMAI Washington DC Chapter, which serves hospitality professionals throughout the Washington metropolitan area, today announced the appointment of a new chair, chair-elect and two members to its advisory board.

Sheila Hession, executive director of sales at the MGM National Harbor resort in Oxon Hill, Maryland, will serve as advisory board chair joined by the chair-elect, Leticia Proctor, senior vice president of sales, marketing & revenue management for Donohoe Hospitality Services, Bethesda, Maryland, and two new board members, Vanessa Wilson, director of sales & marketing for the Hilton Washington DC National Mall, and Lajja Ashar, PS area manager for Booking.com (USA) Inc., both in Washington.

“Sheila Hession, Leticia Proctor, Vanessa Wilson and Lajja Ashar are talented and accomplished leaders with extensive hospitality sales and operations experience,” said Ellen Wilson, managing director of the HSMAI Washington DC Chapter. “We are fortunate to have their insights and vision on our board.”

Hession, a 30-year hospitality industry veteran, joined HSMAI Washington DC Chapter’s advisory board in September 2017. Before joining MGM National Harbor, she was director of sales and marketing at the Willard InterContinental hotel in Washington, regional director of sales with Davidson Hotels & Resorts and director of sales and marketing for the L’Enfant Plaza Hotel and Washington Court Hotel on Capitol Hill, both in Washington. Prior to that, she served in leadership roles at the Omni Shoreham Hotel, Washington, and Hyatt Hotels Corporation.

Proctor, who joined the advisory board in 2017, is responsible for the development and implementation of Donohoe Hospitality Services’ sales, marketing and revenue management efforts at the national, regional and property levels. During her career of more than 20 years, she served as senior vice president of sales, revenue management & digital strategies for PM Hotel Group, Washington; regional director of sales for Hersha Hospitality Management; area director of sales and marketing for Kimpton Hotels; and director of sales and marketing for Crestline Hotels and Resorts, Remington Hotels and Resorts and the former Holiday Inn Select Bethesda.

Wilson, a 20-year hospitality veteran, previously was director of sales & marketing for the Hilton Alexandria Mark Center in Virginia, the Hilton Washington DC North/Gaithersburg hotel in Maryland, DoubleTree by Hilton Hotel Washington DC and the Churchill Hotel Near Embassy Row in Washington.

Ashar, who has worked in sales and marketing for more than 14 years, is responsible for leading Booking.com’s multiple account management teams that oversee the accommodations in Washington, Maryland, Virginia, West Virginia and Delaware. Earlier in her career, she served InterContinental Hotels Group, was area revenue director and sales director for hotel management companies and worked in product marketing and merchandising for Johnson & Johnson and Kraft Foods.

Other HSMAI Washington DC Chapter board members include Iman Butler, director of group sales for the Washington Marriott Wardman Park; Linda Caruso, director of sales & marketing for the Hyatt Centric Arlington in Virginia; Jennifer Hill, vice president of client engagement for Kalibri Labs in Washington; Carol Motley, director of convention sales for Destination DC; Jennifer Phillips, area director of revenue management for Marriott International in Bethesda, Maryland; and Suzanne Shogren, regional director, ownership group services, for Cvent in Tysons Corner, Virginia.

About HSMAI Washington DC Chapter

HSMAI Washington DC Chapter is an affiliate of the Hospitality Sales and Marketing Association International, an individual membership organization based in McLean, Virginia, composed of more than 7,000 members worldwide, with 40 chapters in the Americas Region.

HSMAI is committed to growing business for hotels and their partners and is the industry's leading advocate for intelligent, sustainable hotel revenue growth. The association provides hotel professionals and their partners with tools, insights and expertise to fuel sales, inspire marketing and optimize revenue through programs including the Adrian Awards and Revenue Optimization Conference.

Read the full article on Hotel News Resources

HB ON THE SCENE: Industry Outlook on 2019 is More of the Same

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BY CJ ARLOTTA 

LOS ANGELES—More than 3,000 delegates have gathered at this year’s Americas Lodging Investment Summit (ALIS) to find out the future of the industry. For now, industry experts are expecting more of the same in 2019, but they’re not so certain about 2020. Panelists during the general session covered several trending topics, including where the industry is heading, brand standards and advocacy.

Key takeaways from the morning’s stats session (panelists included Cindy Estis Green, CEO/co-founder of Kalibri Labs; Vail S. Ross, SVP of STR; R. Mark Woodworth, senior managing director of CBRE Hotels; and Mark Wynne Smith, global CEO of hotels at JLL):

  • Highly liquid markets include Boston, Miami, San Diego and San Francisco.

  • Cap rates held steady in H2 2018 but are expected to trend up in 2019.

  • In 2019, supply is expected to increase by 1.9%; demand is forecast to increase by 1.9%; occupancy is projected to remain flat; RevPAR is forecast to increase by 2.3%; and ADR is expected to increase by 2.3%.

  • Hotel debt markets are expected to remain strong throughout 2019, but the ultimate trajectory of the market will remain closely tied to what happens in Washington, DC.

  • There’s a 40% chance of a recession in 2020.

  • In 2020, supply is expected to increase by 1.9%; demand is forecast to increase by 1.7%; occupancy is projected to decrease by 0.2%; RevPAR is forecast to increase by 1.9%; and ADR is expected to increase by 2.2.

  • Increased robotics can help labor shortage issues in the industry.

Read the full article on Hotel Business

2019: The Year Hotels Get a Grip on Acquisition Costs

By Jason Q. Freed, Managing Editor at Duetto

Examining the challenges and opportunities facing hoteliers in 2019, it might be easy to say, "New year, same old story." In attempts to drive revenue and increase profitability, hoteliers—like they have for seemingly the past decade—continue to focus on less costly ways to acquire guests.

On one hand, OTAs continue to grow share, release new features to better connect with your guest and, in general, innovate faster than the large hotel brands. This is a problem because part of the allure of a hotel brand is the giant distribution system that comes with it, supposedly bringing guests at a much lower cost. Therefore, upcoming negotiations between Marriott and Expedia are expected to be tense and the results could have a wide-ranging impact on industrywide commissions.

On the other hand, most independent hotels today better understand the relationship and the value that third-party distribution channels bring and are finding ways to only use them in need periods and to target specific markets. "Optimizing one's distribution mix is probably a lot more productive than fighting OTAs," says hospitality marketing consultant Martin Soler.

When it's all said and done, we expect hoteliers in 2019 to have better insights into the cost of each of their distribution channels and the relevant information to make educated decisions on how to acquire guests.

OTAs Facing New Competition

The days of fearing that Expedia and Booking.com will dominate distribution and bankrupt your business are over. After gobbling up most of the other third-party distribution sites and building what appeared to be a duopoly, Expedia and Booking suddenly find themselves facing new competition in Google, Airbnb and eventually Amazon. For hoteliers, this new competition is good and drives down costs.

For example, according to a Skift report, in 2008 Expedia and Booking Holdings were capturing $19 of travel sales for every $1 they spent in marketing. Today, each dollar spent on marketing earns them closer to $16 in bookings, a 15% decline in efficiency.

While Expedia enters 2019 calling itself, "The World's Travel Platform," Skift is quick to point out that in 2018 Expedia had only 12% of overall travel market share in the U.S. and Canada, its biggest market. Don't forget about global sites like Booking.com, Ctrip, TripAdvisor, and—perhaps most importantly—Google.

Book Direct Campaigns Working

Earlier this year, Soler opined that the "Direct vs OTA" debate had lost a lot of steam. Hotels weren't ignoring their efforts to drive business direct, he said, but better understood the complexity of competing with OTAs.

Then out came a report by Kalibri Labs saying "Book Direct" campaigns launched by many of the big brands last year have in fact been successful in "either stabilizing or strengthening the growth rate of bookings via proprietary hotel company websites."

Kalibri has been examining hotels' efforts to drive direct business through their loyalty programs, which often offer a 10% discount or similar to entice travelers to join their loyalty programs and book directly with the brand or the hotel. "Bookings growth for online travel agencies during this period either held steady or decelerated, signaling a shift for the hotel industry," Kalibri said.

Undoubtedly the results of this report, coupled with the internal findings from brands who initiated Book Direct campaigns, will provide a momentum boost to hotels looking to take back share through personalization and loyalty membership bookings.

Read the full article on Hospitality Net

Analysts expect 2019 to be a healthy year for hotels

Executives from STR, CBRE Hotels, Kalibri Labs and JLL shared their forecasts at ALIS and talked about rate, supply and other trends hoteliers should keep an eye on.

Industry analysts shared insight into U.S. hotel industry performance and what to watch in 2019. From left: Kalibri Labs’ Cindy Estis Green, STR’s Vail Ross, CBRE Hotels’ Mark Woodworth and JLL’s Mark Wynne Smith.

Industry analysts shared insight into U.S. hotel industry performance and what to watch in 2019. From left: Kalibri Labs’ Cindy Estis Green, STR’s Vail Ross, CBRE Hotels’ Mark Woodworth and JLL’s Mark Wynne Smith.

By  Stephanie Ricca

LOS ANGELES—Numbers lend credibility to conversations about where the hotel industry is in a cycle and whether the future looks like a peak or a valley.

At the Americas Lodging Investment Summit, executives from several data analysis companies put 2018 performance and activity into context, shared how the next few years are shaping up, and what hoteliers should be aware of when it comes to the data.

Vail Ross, SVP of global business development and marketing at STR, said 2018 “was a good year, not a great year.” (STR is the parent company of Hotel News Now.)

“We’ve had better years, but we’re still seeing some positive growth,” she said.

Compared with 2017, U.S. hotels ended 2018 with a 0.5% increase in occupancy to 66.2% and 2.4% growth in average daily rate to $129.83, leading to revenue per available room of $85.96, up 2.9%.

For 2019, STR and Tourism Economics downgraded their forecast slightly, projecting that flat occupancy and 2.3% ADR growth will lead to 2.3% RevPAR growth in 2019.

CBRE Hotels Senior Managing Director Mark Woodworth put 2019 hotel performance in “the blip category,” saying the industry won’t see a dip but more of a softer blip.

He pointed to strong consumer and government spending, which continue to drive GDP growth, as a solid underpinning of travel and hotel performance.

“Overall, the picture remains very healthy,” he said. “There’s still some decent growth in some of these markets.”

Kalibri Labs, which tracks guest-paid revenue, net revenue and revenue capture, sees “healthy growth” in the guest-paid revenue category in 2019, CEO and founder Cindy Estis Green said.

“Guests are paying, we expect, 4.4% more in the next year compared to 2018, and this is good and encouraging news,” she said.

However, net revenue growth is expected to slow in 2019, as hotels retain less of what guests pay. “We’re not able to flow-through more of that revenue,” she said.

Kalibri Labs forecasts RevPAR growth of approximately 1.9% in 2019, driven by ADR growth and flat occupancy, but Estis Green said she worries about headwinds from channel-related distribution costs.

Read the full article on Hotel News Now

How Did the Government Shutdown Impact the Hotel Market?

Experts at ALIS said that the government shutdown was “not insignificant,” estimating it produced a loss of hundreds of millions of dollars and impacted GDP growth.

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The government shutdown had a significant impact on hotel activity—and it was only a partial shutdown. The recent event, which ended this week after 35 days, was among the topics that The Numbers – What to Expect in 2019 and Beyond discussed at ALIS this week. The panel included moderator Kristian Gathright , EVP and COO at Apple Hospitality REIT, and speakers Cindy Estis Green, CEO and co-founder of Kalibri LabsVail S. Ross, SVP at STRMark Woodworth, senior managing director at CBRE Hotels; and Mark Wynne Smith, global CEO of Hotels at JLL.

While the topic of the government shutdown came up early in the conversation as part of a discussion about political uncertainty and projected RevPar growth—which will likely slow down in 2019—a question about the impact of the shutdown came from the audience. Green said that the impact was “not insignificant.” She estimated that the government business is valued at approximately 4% of guest paid revenue or a total of $10 billion to $12 billion per year. That is $800 million to $1 billion per month in revenue. In Washington DC, where Green is based, she said that hotels experienced a 25% to 35% drop in activity, but the rest of the US likely saw closer to a 10% decline in activity as a result of the shutdown. “That is huge,” she said.

Read the full article on GlobeSt.com

Hotel Direct Booking Efforts Create Lasting Loyalty: New Report

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In 2017, a report from Kalibri Labs suggested that the massive direct booking pushes launched a year earlier by the major hotel companies — Hilton, Marriott, InterContinental Hotels Group, and Hyatt among them —actually worked.

And today, more than two years later, a new report from Kalibri suggests that not only did the campaigns work, but those campaigns — many of which included discounted room rates — generated loyal customers and guests.

“Some people were sure [consumers] just signed up [for the hotel loyalty programs] to get discounts and that those members may have dropped off,” Kalibri Labs CEO and co-founder Cindy Estis-Green said. “We didn’t track data by numbers of personally identifying information because of security, but the loyalty numbers keep going up. Fifty percent and growing is now the average when it comes to contribution to occupancy from brand.com channels.” Kalibri evaluates and predicts hotel revenue performance.

Examining hotel stays that took place from January 2016 to August 2018, Kalibri’s research looked at a total of 19,000 hotels that had loyalty programs, ranging from economy to luxury properties throughout the U.S., and representing a total of 80 million different transactions.

“What the second study has borne out is that the new loyalty members have stayed loyal,” said Chad Crandell, managing director and CEO of CHMWarnick, a hotel-asset-management and owner-advisory-services company that represents more than 70 hotels. “The return on investment that was somewhat speculative [with regard to the book direct campaigns] has borne out to be very accurate. The direct booking programs were effective in growing the membership base and those members continue to be loyal to the programs they’ve enrolled in.”

The new report also noted that loyalty members comprise the largest customer base for branded hotels in the U.S., growing 30 to 40 percent year over year from 2015 to 2016 when the direct booking campaigns debuted. And even today, nearly half of the business in the U.S. branded hotels comes from loyalty members.

Further, Kalibri’s data also indicates that the net average daily rate for brand.com loyalty bookings is higher than the net average daily rate for bookings made via a third party, such as an online travel agency like Expedia or Booking.com. The average daily rate for loyalty member bookings, after acquisition costs are removed, reflects a premium in comparison to bookings made via an online travel agency. Net average daily rate for loyalty bookings grew to 9 percent in 2018, up from 8.6 percent in 2016.

“Ownership is looking for the cost of guest acquisition,” Crandell noted. “This helps the industry better understand that we should be looking at net average daily rate, or the next of cost to acquire that guest.”

Kalibri’s research also demonstrates the lifetime value of loyalty customers. A repeat guest who stays with a hotel three times after her initial visit, averages approximately $65 per loyalty member to a hotel, compared to having four different guests who have booked their stays via an online travel agency.

“The loyalty members are giving hotel owners a higher room and they spend more money in the hotel,” Crandell noted.

Read the full article on Skift

HM Exclusive: Kalibri Labs' study finds sustained growth in direct bookings

by Elliott Mest

Hotel companies continue to grapple with online travel agencies for guest bookings and a new study from Rockville, MD-based Kalibri Labs—shared exclusively with Hotel Management in advance of release—indicates their efforts have not been in vain.

The Kalibri Labs’ report, now in its second year and titled “Book Direct Campaigns 2.0: The Costs and Benefits of Loyalty in 2018,” found hotel companies’ initial campaigns to attract loyalty members and drive direct bookings over a period from January 2016 through August 2018 have either stabilized or strengthened the growth rate of bookings via proprietary hotel company websites—the so-called Brand.com sites—primarily by growing loyalty programs. Meanwhile, bookings growth for online travel agencies during this period either held steady or decelerated, signaling a shift for the hotel industry.

Kalibri Labs' CEO and co-founder, Cindy Estis Green and VP of Revenue Strategy, Mark Mazzocco, authored the report. The first study, released in Oct. 2017, was commissioned to compare and contrast the hotel industry’s direct-booking pace before and after engagement campaigns were launched. This latest iteration examines whether the gains made from these campaigns can be sustained.

After two-and-a-half years of promoting direct bookings, roomnight demand through Brand.com in the United States is on average 50 percent higher than OTA roomnight demand, said Estis Green. While the original study examined 52 million bookings, this time Kalibri Labs combed through 80 million bookings and found while the industry benefitted from a burst of initial direct business as a result of large-scale advertising campaigns, true long-term gains were realized once hotels began updating their mobile applications to offer more perks for booking direct.

According to the new study, bookings made via Brand.com and those made directly with a hotel property account for 23 percent and 29 percent of all bookings, respectively, made between August 2017 and August 2018. Meanwhile, OTAs represent 15 percent of all bookings, trending closer to group bookings at 14 percent. Additionally, bookings made via voice channels stand at 8 percent, so all told the industry records roughly six in 10 room nights through direct channels.

“In the beginning, [brands] were all offering discounts on bookings, sometimes up to 10 percent, to entice people to sign up to be loyalty members,” said Estis Green. “In the last 2.5 years, almost all brands have substantially updated their apps to offer keyless entry, more features, mobile check-in and different services such as those. All these benefits only apply when booking through the brand’s app or as a loyalty member and those things were not in place in the beginning.”

Loyalty bookings made directly through a hotel’s website generate a return on investment that is nearly double that of the revenue earned via OTA channels. Source: Kalibri Labs

Loyalty bookings made directly through a hotel’s website generate a return on investment that is nearly double that of the revenue earned via OTA channels. Source: Kalibri Labs

Executive Insights: Cindy Estis Green CEO and Co-Founder of Kalibri Labs

Source: HP Hotels Fall Newsletter

In this interview, Cindy Estis Green, CEO & Co-founder of Kalibri Labs, discusses hospitality data collection and benchmarking and the emergence of a new discipline of revenue strategy

Cindy’s hospitality career includes serving with Hilton International and founding the data mining consultancy, Driving Revenue, which was later sold to Pegasus Solutions. She was also inducted into the prestigious HFTP Hospitality Technology Hall of Fame and named as one of Cornell University’s 90 Influential Hotelies.
 
Cindy says the Kalibri name is meant to evoke the hummingbird (colibrí in Spanish), which can fly backwards and forwards, representing a view of data both historical and predictive models for the future; the company name sounds like the word calibrate and contains the word libra, for balance and truth.

What distinguishes Kalibri Labs’ approach to the hospitality sector?

We formed Kalibri Labs about six years ago as a next generation benchmarking and Big Data platform that collects data from all hotels in the U.S. and we are expanding globally. We have cost information for about seven billion transactions in our database right now and we add about another 100 million transactions each month.
 
We want benchmarking and performance evaluation to reflect the quickly evolving digital market place and its impact on the economics of hotels. For example, instead of taking a legacy approach to RevPAR, we look at net RevPAR, a key component of which is the cost of customer acquisition.
 
This is a different focus from when I first entered the industry, where everything was focused on top line revenue. But, today, with online travel agents, search engines, the prominence of big tech companies and entities like Airbnb, it becomes important to manage both revenue as well as the cost of acquiring that revenue. Our tools help hotel operators do that.

What hospitality entities do you work with?
We work with those interested in looking at hotel performance, especially owners, operators and brands that want to move into the next generation of performance evaluation, as well as destination marketing organizations and the entire real estate ecosystem such as brokers, bankers, advisory services and developers. 
 
In particular, we have done a lot of work with real estate developers to inform their decisions around brand choice, transaction pricing and overall buy and sell decisions.
  

What is the next or further goal of your approach?
We continue to develop algorithms aimed at understanding the optimal business mix for any property. In doing so, in addition to tracking the cost of acquisition, as just discussed, the Kalibri Labs Optimal Business Mix algorithm looks at a wide range of factors to include meeting space availability, a hotel’s base of loyalty contribution and consumer reviews.
 
We also analyze comp sets by customer segments and by weekpart. In the traditional world, you might look at RevPAR and how you compare to nearby competitors. But traditional benchmarking may be misleading if you are narrowing your scope to a small number of hotels with which you have, say, a 50 percent to 70 percent overlap in business production. However, there may be many more additional hotels with which you overlap in just one or two segments, but those may be valuable segments for you.
 
We are trying to derive a more realistic benchmark for a hotel than just an arithmetic average of the performance of a handful of nearby hotels. The goal is to understand the full range of opportunities in any market and enable a hotel to benchmark itself against the best it can achieve knowing realistic market opportunity and competitive performance, given the constraints of customer feedback, brand contribution (using loyalty as a proxy) and physical plant (guest and meeting rooms).
 
How might this apply to real estate development?

Our approach also has significant implications for determining transaction values and the viability of new developments.

Let’s consider the example of an extended stay property. We would look at the volume of long term stay in a market in a variety of ways, including by length of stay and how many hotels are serving each segment of extended stay demand. Are traditional hotels absorbing that demand; or is there room for dedicated, purpose-built product to accommodate that market? We can answer questions like that in ways that weren’t possible before.

What is one big takeaway from what you have learned about net revenue?
Hotels are spending about 15 to 25 percent to acquire customers; second only to labor cost. Owners and operators all manage labor even though it is considered “a cost of doing business”; so why wouldn’t you want to take a similar approach with cost of acquisition? Hotel operators can be too accepting of commission cost as something that cannot be managed, but that is the big lesson from the data. It’s not a matter of negotiating better OTA or third party vendor deals, which is usually not in the control of a hotel, but rather managing the hotel’s channel mix, which largely is.
 
Cost of customer acquisition will be a huge variable in the next decade. As a strategy in controlling these costs, loyalty programs will be the retaining wall for the hotel brands that will really differentiate them and give them strength going forward in supporting hotels’ efforts to control cost of acquisition by reinforcing the direct channels. And at the hotel level, the operators need to gain expertise in managing each segment and each channel so they learn to leverage opportunities as profit contribution managers.

What’s next for Kalibri Labs?
We will continue to expand the use of our optimal business mix algorithms, which, among other things, will help entities forecast budgets more accurately.
 
Planning tools become critical for budgeting and forecasting and in a real estate scenario where you are considering an acquisition.  You can run different numbers and scenarios into our model to improve the underwriting accuracy.
 
We want to open the aperture on the lens so that those involved in the real estate community are more fully aware of the range of opportunities available to them; or they can set their targets in a broader way and gain accuracy due to an understanding of the composition of RevPAR in a market, not just guessing on the underlying strength of a market with broad brush top line numbers.


How would you sum up progress in this area?
We have built a revenue strategy platform, which supplements the  efforts around traditional revenue management. Going forward, this discipline of revenue strategy, which is much more holistic, has to enable hotel operators to take actions that go beyond pricing and inventory management.  These include group, corporate and travel agent sales, digital marketing, and other promotional activities such as loyalty, email or lead generation programs. In a nutshell, you could be optimal in pricing, but sub-optimal in performance because the team has not looked across all opportunities and set targets that point toward shared profit contribution goals using all revenue levers.
 
The approach of revenue strategy allows owners to make sure that the operating team is aligned with its asset valuation target by building operating targets that have a direct connection to flow-through on every revenue opportunity they pursue.